Question #47602

given that c=200+0.8(y-t).
a. what is the equilibrium level of national income?
b. derive the savings function and find the level of savings.

Expert's answer

c = 200 + 0.8(y - t)

a. the equilibrium level of national income will be:

c = 200 + 0.8y - 0.8t, so

0.8y = c + 0.8t - 200

y = 1.25c + t - 250

b. derive the savings function and find the level of savings.

s = y - c - t = y - 200 - 0.8y + 0.8t - t = 0.2y - 0.2t - 200 = 0.2(y - t) - 200

a. the equilibrium level of national income will be:

c = 200 + 0.8y - 0.8t, so

0.8y = c + 0.8t - 200

y = 1.25c + t - 250

b. derive the savings function and find the level of savings.

s = y - c - t = y - 200 - 0.8y + 0.8t - t = 0.2y - 0.2t - 200 = 0.2(y - t) - 200

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